Benchmarking Method

Glen Anderson, Chief of PartyClimate Change Resilient Development Project

Zagreb, CroatiaJune 29, 2015

Background

• Developed by the World Bank to:– Identify economic benefits of large scale NMHS modernization

investments; and– Enable national decision-makers to understand the necessary

level of funding for NMHS services

• Focuses on a country’s vulnerability to weather-related events and damages

• Methods:– Country-level for all sectors– Specific weather-sensitive sectors

• Results for 11 Europe and Central Asia countries – B/C ratios of 2:1 to 14:1 depending on country and method

Benchmarking Method

• We will focus on the country-level benchmarking method• Information requirements:

– GDP and/or GDP for key economic sectors– Estimate of annual damages (aggregate number or percentage of

GDP)– Annual expenditures on met/hydro services– Value of proposed investments

• Assumptions– Country level vulnerability to weather-related events – Damage reduction factor for new investments– Damage increase factor in absence of met/hydro services

Exercise 1: Benchmarking

• Step 1 – Estimate the average annual value of damages– If quantified, then enter the annual amount– If estimated as percentage of GDP, convert to aggregate amount– If no estimate is available:

• WB uses damage multipliers ranging from 0.1% of GDP to 1.0% of GDP• For our exercise, convert your vulnerability assessments to damage

multipliers as follows:– Vulnerability = 1 0.2%– Vulnerability = 2 0.4%– Vulnerability = 3 0.6%– Vulnerability = 4 0.8%– Vulnerability = 5 1.0%

– Average Damages = GDP x damage multiplier

Exercise 1: Benchmarking – Investment in NMHS

• Step 2a – Assign damage reduction factor– WB uses factors from 20% to 60% depending on:

• How good are current services• What is the nature of weather-related damages

• Step 3a – Estimate potential benefits of improvements in services Potential benefits = Average Damages x Damage reduction factor%

• Step 4a – Estimate costs to achieve the potential benefits– Can look at these costs as a % of current costs to provide services or

proposed value of an investment

• Step 5a – Compare potential benefits to costs to improve servicesB/C Ratio = Potential benefits ÷ investment costs

Exercise 1: Benchmarking – Loss of NMHS

• Step 2b – Assign damage increase factor– WB uses factors from 20% to 60% depending on:

• Without current met/hydro services, how would users obtain information and make decisions

• Step 3b – Estimate potential increase in damages Potential increase = Average Damages x Damage increase factor%

• Step 4b – Costs of NMHS met/hydro services• Step 5b – Compare potential benefits and costs

– This is a different kind of calculation than for a new investment as you want to demonstrate that the higher damages that would be avoided by NOT eliminating the NMHS would be highly valued

B/C Ratio = Increased damages ÷ NMHS costs